Santa Marta Pre-Conference | Energy Transition and Sovereign Debt: Fiscal, external, and political economy dimensions  

For countries that depend on oil, gas, or coal exports, the shift away from fossil fuels threatens the revenues that keep public finances afloat and external debt serviceable. For energy importers, rising costs and shifting capital flows add pressure to already stretched balance-of-payments positions. For many low- and middle-income countries, this comes at a moment when debt vulnerabilities are high, with servicing costs already crowding out spending on infrastructure, education, and climate resilience.  

This session brings together three perspectives that are rarely combined: the effect on debt vulnerabilities associated with the fiscal risks of the transition, its external macroeconomic dynamics, and the political economy constraints that shape what governments can actually do. It will look at how can developing countries – whether fossil fuel exporters or energy importers – can phase out fossil fuels without tipping into sovereign debt crisis, and the role multilateral institutions can play in making that possible.  

This session is held as part of the workstream Defunding fossils, funding transition at the Science and Policy Pre-Conference.  

Discussion questions

• What types of sovereign debt vulnerabilities may emerge during the energy transition for developing countries?
• How do these vulnerabilities differ between fossil fuel exporters and energy-importing economies?
• Through what mechanisms can the transition generate external-sector debt vulnerabilities, for example through declining export revenues or rising energy import bills?
• How should debt sustainability frameworks evolve to better capture risks emerging from both fiscal and external channels?
• What macroeconomic policies can help countries build the fiscal and external conditions needed to avoid debt vulnerabilities while phasing out fossil fuels?
• How do political economy constraints shape governments’ ability to manage these fiscal and external challenges during the transition? What can multilaterals do to support developing countries move towards a greener and more financially sustainable future?  

Speakers

• Hassan Mahmud, President, Nigeria Association for Energy Economics and Chief Economist, Dangote Group
• Mehdi Oomar, Legal counsel and regional coordinator for Southern Africa, African Legal Support Facility
• Nicolas Lippolis, Founder and Executive Director, Centre for Energy, Finance and Development
• Yanne Horas, Policy Advisor, International Institute for Sustainable Development